CHAPTER VII
THE PURPOSE OF THE APPRAISAL
General Statement
Various Purposes of Appraisal. — The owner of an operating
property is interested more in knowing what it has cost him
than he is in the value of the property, until the time comes
when a transfer of ownership is to be made or the business is
to be capitalized. Generally, however, when any enterprise of
considerable magnitude is involved the owner should, at all
times, have a clear conception of its value. This can only be
obtained by making the analysis of the investment and of operating
 expenses in relation to revenue, and involves much more
than a study of financial records. The condition and adaptability
 of a plant to the uses to which it is being put are involved
and must be considered by the appraiser. Valuation, therefore,
may be required:
a. As a basis for a purchase and sale transaction.
b. When the property is to be pledged as a security for a loan
or as the basis for a bond issue.
¢. When the rates of a public utility are to be fixed or regulated,
 because the earnings resulting from the rates should be
adequate to bring a suitable return on the investment and because
 the charge for the service should be reasonable.
d. As a basis for taxation.
The taxation value bears or is intended to bear some definite
relation to market value. This is not only true in the case of
ordinary taxation, for the purpose of carrying on government,
but also in the innumerable cases in which it becomes necessary
 to apportion to the property which is benefitted, the cost of
some improvement in proportion to the benefits which it confers.

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